ECON 1123 FINAL REVIEW-1
In the long run: A) all factors of production are fixed. B) only some inputs of a firm can be changed. C) all firms earn positive economic profits. D) all factors of production can be changed.
D
The quantity demanded of a good is: A) determined independent of the market price. B) always determined by government intervention. C) the amount of a good that sellers are willing to supply at a given market price. D) the amount of a good that buyers are willing to purchase at a given market price.
D
There are a few ship manufacturers in Polonia and each firm faces a downward sloping demand curve. The ship-building industry in Polonia is an example of a(n) −−−−−−−−. A) perfect competition B) monopolistic competition C) monopoly D) oligopoly
D
Which of the following correctly explains the role of the government in a free market? A) The government sets production quotas for sellers in the market. B) The government sets prices according to the relative value of each good. C) The government allocates goods to those buyers who value the goods the most. D) The government acts as a referee by enforcing contracts and preventing stealing.
D
* Refer to the scenario above. Which of the following strategy combinations denote a Nash equilibrium? A) (Left, Left) B) (Left, Right) C) (Right, Left ) D) (Right, Right)
A
A Nash equilibrium occurs if −−−−−−−−. A) each player chooses strategies that are mutual best responses B) each player chooses his or her dominant strategy C) each player chooses only a pure strategy D) each player chooses only a mixed strategy
A
A cost-benefit calculation that focuses on the difference between a feasible alternative and the next feasible alternative is called: A) marginal analysis. B) cardinal analysis. C) Pareto analysis. D) ordinal analysis.
A
A price ceiling imposed by the government: A) can create situations of excess demand. B) is a tax that increases the market price of a good. C) involves pricing a commodity above the market price. D) helps in establishing equilibrium in case of shortage or surplus.
A
A strategy is called a pure strategy if it involves choosing −−−−−−−−. A) one particular action for a situation B) different combinations of actions for a situation C) an action that yields a higher payoff to the opponent D) an action that yields zero payoff to the player.
A
An expected increase in the market price of oil in the coming year is likely to: A) shift the supply curve of oil to the left in the current year. B) shift the supply curve of oil to the right in the current year. C) shift the demand curve for oil to the left in the current year. D) cause no changes in the demand and supply curves of oil in the current year.
A
Higher price elasticity of demand means that a consumer's demand is: A) more responsive to price changes. B) less responsive to price changes. C) less responsive to income changes. D) more responsive to income changes.
A
If an individual's opportunity cost of commute is $300 per month and his monthly commuting time is 60 hours, his opportunity cost of time is: A) $5 per hour. B) $10 per hour. C) $30 per hour. D) $60 per hour.
A
If the percentage change in the quantity supplied of a good is less than the percentage change in price of the good, the good is said to have a(n): A) inelastic supply. B) unit elastic supply. C) elastic supply. D) perfectly elastic supply.
A
In a duopoly with homogeneous products, the best response of a firm is to charge a lower price than its rival as long as −−−−−−−−. A) the rival's price is above marginal cost B) the rival's price is below marginal cost C) the rival's price is above average cost D) the rival's price is below average cost
A
In which of the four market structures do sellers act as price takers? A) Perfect competition B) Monopolistic competition C) Monopoly D) Oligopoly
A
Marginal cost is the change in the: A) total cost associated with producing one more unit of output. B) average total cost associated with producing one more unit of output. C) average variable cost associated with producing one more unit of output. D) opportunity cost associated with producing one more unit of output.
A
Social surplus is maximized in a(n) −−−−−−−−. A) perfectly competitive market B) monopolistically competitive market C) monopoly market D) oligopoly market
A
The equilibrium quantity in a perfectly competitive market is determined: A) at the point of intersection of the demand and supply curves. B) at the point of tangency between the demand and supply curves. C) at the point of intersection of the supply curve and the quantity axis. D) at the point of intersection of the demand curve and the quantity axis.
A
The market outcome in a duopoly with homogeneous products is similar to that in −−−−−−−− A) a perfectly competitive market B) a monopolistically competitive market C) a monopoly D) an oligopoly with differentiated products
A
The optimal strategy of a goalie in penalty kicking is similar to that in a(n) −−−−−−−−. A) zero-sum game B) symmetric game C) extensive-form game D) prisoners' dilemma
A
The prisoners' dilemma is an example of a(n) −−−−−−−− game. A) simultaneous move B) extensive-form C) zero-sum D) mixed strategy
A
Total cost of production refers to the: A) sum of variable costs and fixed costs. B) product of variable costs and fixed costs. C) difference between variable costs and fixed costs. D) ratio of variable costs to fixed costs.
A
When buyers and sellers optimize in a perfectly competitive market, −−−−−−−−. A) social surplus is maximized B) social surplus is minimized C) only consumer surplus is maximized D) only consumer surplus is minimized
A
When the price of milk is $3 per bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's arc elasticity of demand for milk is: A) -0.25. B) -0.43. C) -0.50. D) -0.75.
A
Which of the following is likely to lead to a right shift in the supply curve of cotton? A) An increase in labor productivity due to training programs B) A rise in labor costs due to wage demands by labor unions C) An increase in the price of cotton D) A decrease in the price of cotton
A
Which of the following market structures has the highest market concentration? A) A monopoly B) An oligopoly with differentiated products C) A perfect competition D) A monopolistic competition
A
Which of the following statements correctly describes a perfectly competitive market? A) All participants in a perfectly competitive market are price takers. B) Haggling and bargaining is commonly observed in a perfectly competitive market. C) In a perfectly competitive market, individual sellers and buyers can influence the market price. D) Buyers in a perfectly competitive market pay different prices according to their individual demand.
A
While making a purchase decision using marginal thinking, a buyer should buy the good that yields the: A) highest marginal benefit per dollar spent. B) lowest marginal benefit per dollar spent. C) highest average benefit plus marginal benefit per dollar spent. D) lowest average benefit plus marginal benefit per dollar spent.
A
* Refer to the figure above. What does the region ABCPe denote? A) Economic profit B) Loss incurred by the producer C) Consumer surplus D) Deadweight loss
B
* Refer to the figure above. What is the producer surplus in the market? A) $50 B) $75 C) $150 D) $200 Q7.
B
*Refer to the figure above. What is the maximum possible social surplus? A) $100 B) $150 C) $225 D) $375
B
. A −−−−−−−− is an extensive -form representation of a game. A) payoff matrix B) game tree C) Nash equilibrium D) pure strategy
B
A buyer is said to be a price taker if she: A) can bargain over the prices of the goods she consumes. B) can purchase any amount of a good at a fixed price provided she has the money to pay for it. C) always pays less than the market-determined price for the goods she is consuming. D) ignores the prices of related goods and considers only the price of the goods she is purchasing.
B
A collusion can work if −−−−−−−−. A) a colluder can cheat without being detected B) a colluder values future monopoly profits more than current profits C) a colluder charges a price higher than his partners D) a colluder gives secret price discounts
B
A profit-maximizing monopolistic competitor continues production until −−−−−−−− A) marginal revenue exceeds marginal cost B) marginal revenue equals marginal cost C) marginal revenue exceeds average revenue D) marginal revenue equals average revenue
B
A strategy is called a mixed strategy if involves choosing −−−−−−−−. A) one particular action for a situation B) different actions randomly C) an action that yields a higher payoff to the opponent D) an action that yields zero payoff to the player
B
A −−−−−−−− is the price at which a trading partner is indifferent between making the trade and not doing so. A) market value B) reservation value C) shadow value D) discounted value
B
An increase in the demand for a good is represented by: A) a left shift to a new demand curve. B) a right shift to a new demand curve. C) a leftward movement along the demand curve. D) a rightward movement along the demand curve.
B
An individual rents an apartment for $200 per month. His monthly opportunity cost of commuting to work from this apartment is $50. After a year, he moves to an apartment closer to his place of work, but pays $250 as rent. Compared to the initial situation, after a year: A) his direct cost of renting the apartment increases, while the indirect cost of renting the apartment remains unchanged. B) his direct cost of renting the apartment increases, while the indirect cost of renting the apartment decreases. C) his direct cost of renting the apartment remains the same, while the indirect cost of renting the apartment decreases. D) his direct cost of renting the apartment remains the same, while the indirect cost of renting the apartment increases.
B
Collusion occurs when firms −−−−−−−. A) charge a price equal to their marginal cost of production B) conspire to set the quantity they produce or the prices they charge C) compete with each other by setting a price slightly lower than the rival's price D) compete with each other by differentiating their products
B
Free entry is said to exist in an industry when: A) all firms entering an industry enjoy economies of scale. B) entry is unfettered by any special legal or technical barriers. C) equal amounts of inputs are available to all firms entering an industry. D) the government subsidizes costs for all new firms entering an industry.
B
Game theory is the study of −−−−−−−−. A) policy analysis B) strategic interactions C) program evaluation D) irrational decision making
B
Graphically, producer surplus is the: A) difference between the demand curve and the price a consumer pays. B) difference between the supply curve and the price a consumer pays. C) difference between total cost and total revenue. D) product of price of a good and quantity sold.
B
If firms in a competitive industry independently operate to maximize profits, the −−−−−−−− are eventually equalized across the firms. A) total costs B) marginal costs C) profits D) revenues The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry.
B
If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint: A) pivots rightward without a change in the intercept on the horizontal axis. B) pivots leftward without a change in the intercept on the horizontal axis. C) shifts to the right. D) shifts to the left.
B
If the total cost incurred in hiring ten workers by a firm is $45, and the total cost incurred when the eleventh worker is hired is $60, the marginal cost of hiring the eleventh worker is: A) $1.33. B) $15. C) $20. D) $105.
B
In a marketplace, the rental price of apartments is determined by: A) negotiations between renters and regulators. B) negotiations between renters and landlords. C) negotiations between landlords and regulators. D) negotiations between politicians and regulators.
B
Producer surplus is the: A) sum of a seller's reservation value and the price he finally receives. B) difference between a seller's reservation value and the price he finally receives. C) product of a seller's reservation value and the price he finally receives. D) ratio of a seller's reservation value to the price he finally receives.
B
Refer to the scenario above. The demand for Sporty's soccer balls is 2,500 units if −−−−−−−−. A) the price charged by Sporty is higher than the price charged by Go! B) the price charged by Go! is higher than the price charged by Sporty C) the price charged by Sporty is equal to the price charged by Go! D) the price charged by Sporty is higher than the cost of production of each ball
B
Spending more time commuting in exchange for a lower monthly rent refers to a(n): A) barter. B) tradeoff. C) externality. D) monetary exchange.
B
The Herfindahl-Hirschman Index is used to −−−−−−−−. A) measure the price elasticity of demand faced by a firm B) estimate the degree of competition in an industry C) measure the price elasticity of market supply in an industry D) estimate the profit earned by firms in an industry
B
The Law of Supply states that: A) supply creates its own demand. B) the quantity supplied of a good rises when the price rises. C) at the equilibrium price, there is always some excess supply in the market. D) the quantity supplied of a good will always equal the quantity of the good demanded.
B
The first mover in an extensive-form game should use −−−−−−−− to win the game. A) forward induction B) backward induction C) pure strategies D) mixed strategies
B
The profit earned by a monopolistic competitor after the entry of new firms is −−−−−−−−. A) higher than the profit earned by the firm before the entry of new firms B) lower than the profit earned by the firm before the entry of new firms C) equal to the profit earned by a monopolist in the long run D) higher than the profit earned by a perfect competitor in the long run
B
The −−−−−−−− the Herfindahl-Hirschman Index, the −−−−−−−−. A) lower; more concentrated the industry B) higher; more concentrated the industry C) higher; less concentrated the industry D) lower; higher the profits earned in the industry
B
When an outcome is −−−−−−−−, social surplus is −−−−−−−−. A) Pareto inefficient; maximized B) Pareto efficient; maximized C) Pareto efficient; minimized D) Pareto inefficient; minimized
B
Which of the following correctly describes incentives? A) Incentives refer to the maximum price that a buyer is willing to pay for a good. B) Incentives are rewards or penalties that motivate people to behave in a particular way. C) Incentives are prices that are fixed by the government and not by market forces. D) Incentives refer to the minimum price at which a seller is willing to sell a product.
B
Which of the following examples best describes the Law of Diminishing Marginal Benefit? A) If the weather gets cold, the demand for ice cream will fall. B) With each additional pen Jill buys, her willingness to pay for another pen decreases. C) Each additional unit of ice cream that John consumes gives him more and more satisfaction. D) If a seller of notebooks in a perfectly competitive market charges above the market price, his profit decreases.
B
Which of the following factors is expected to cause the demand curve for coffee to shift to the right? A) A fall in the manufacturing cost of coffee B) A higher tax on the sale of tea, a substitute for coffee C) A higher personal tax on the income of all consumers D) An increase in the supply of coffee due to better weather
B
Which of the following helps in preventing firms in the U.S. from forming collusive agreements? A) The low demand faced by colluding firms B) The antitrust policy of the government C) The high rate of corporate income taxes D) The low profit earned by firms after colluding
B
Which of the following is a difference between an oligopoly model with homogeneous products and a monopoly? A) Firms in an oligopoly with homogeneous products earn positive economic profits in the long run, while a monopoly earns zero economic profits in the long run. B) Firms in an oligopoly with homogeneous products face stiff competition from its rivals, while there is no competition in a monopoly.C) There are huge barriers to entry in an oligopoly with identical products, while there are no barriers to entry in a monopoly. D) Firms in an oligopoly with identical products charge a price higher than marginal cost in the long run, while a monopoly charges a price lower than marginal cost in the long run.
B
Which of the following is a similarity between a monopoly and an oligopoly with differentiated products? A) There are no barriers to entry in both markets. B) The long-run equilibrium price in both markets exceeds marginal cost. C) There is a single seller in both markets. D) Firms in both the markets earn zero profit in the long run.
B
Which of the following is true of a payoff matrix? A) It is the representation of only the best response of each player. B) It takes into account all relevant costs and benefits associated with each action of the players. C) It shows the payment made to each factor of production for the production of a good. D) It does not represent all the costs and benefits associated with the choices of the players.
B
Which of the following statements is true of a perfectly competitive market? A) Sellers in the market produce differentiated goods. B) There is free entry and exit in the market. C) There are only a few buyers and sellers in the market. D) Sellers and buyers are both price makers.
B
Which of the following statements is true of marginal analysis? A) Marginal analysis is a tool used in optimization in levels. B) Marginal analysis compares the consequences of doing one more step of something. C) Marginal analysis of alternatives will mostly give an outcome different from optimization in levels. D) Marginal analysis involves the calculation of total net benefits of all the available alternatives.
B
−−−−−−−− is the difference between the willingness to pay and the price paid for a good. A) Producer surplus B) Consumer surplus C) Seller's profit D) Revenue
B
−−−−−−−− is the measure of the sensitivity of one variable to a change in another. A) Multiplier B) Elasticity C) Amplitude D) Buoyancy
B
Assume that a combination of 10 bottles of wine and 2 cartons of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one carton of milk is $1, what is the consumer's income? A) $100 B) $20 C) $120 D) $102
D
*The following figure illustrates the market demand curve for wine. Refer to the figure above. What is the market-wide consumer surplus when the market price of wine is $9? A) $180,000 B) $90,000 C) $60,000 D) $210,000
C
*The following table shows the demand schedules of three consumers of wine. Assume that these three buyers constitute the entire market. Q16. Refer to the table above. What is the market demand for wine when the price is $1? A) 50 units B) 51 units C) 76 units D) 80 units
C
A firm should shut down in the short run if the price is less than the: A) average fixed cost. B) average total cost. C) average variable cost. D) marginal cost.
C
A production function establishes the relationship between: A) the market price of a good and the sales revenue generated. B) the quantity of output produced and the firm's profit. C) the quantity of inputs used and the quantity of output produced. D) the market price of a good and the quantity of output supplied.
C
If the marginal rent cost of moving from Apartment 1 to Apartment 2 is -$60 and marginal commuting cost of moving from Apartment 1 to Apartment 2 is $40: A) moving from Apartment 1 to 2 will cost the renter $60 more in rent and $40 more in commuting. B) moving from Apartment 1 to 2 will save the renter $60 more in rent and $40 more in commuting. C) moving from Apartment 1 to 2 will save the renter $60 in rent but cost $40 more in commuting. D) moving from Apartment 1 to 2 will cost the renter $60 more in rent but save $40 in commuting.
C
In an extensive-form game, payoff to a player is usually higher if −−−−−−−−. A) he follows a pure strategy B) he follows a mixed strategy C) he is the first mover D) he is the second mover
C
Jack is a prospective buyer of a commodity that Jill is offering to sell. Social surplus in this scenario can be maximized: A) when only Jack is optimizing. B) when only Jill is optimizing. C) when both Jack and Jill are optimizing. D) when neither Jack nor Jill is optimizing. The following figure illustrates the demand and supply of decorative light bulbs in a perfectly competitive market.
C
Oligopolists merge to −−−−−−−−. A) increase market supply B) increase market demand C) increase market power D) reduce prices
C
Price in a perfectly competitive market: A) is affected by government policies. B) is determined through auctions. C) is affected by the combined decision of all sellers. D) is determined by buyers alone.
C
Refer to the scenario above. Jack and Jill will derive maximum utility if: A) Jack tries to move the tree while Jill does not. B) Jill tries to move the tree while jack does not. C) both of them try to move the tree. D) neither of them tries to move the tree.
C
In a zero-sum game, −−−−−−−−. A) each player earns a zero payoff irrespective of the strategy one chooses B) each player has a dominant strategy C) each player chooses a pure strategy D) one player's loss is another player's gain
D
Scenario: The market demand for soccer balls in a small town is 2,500 units and there are two rival sports brands selling soccer balls in this town—Sporty and Go! The products of the two brands are identical. Refer to the scenario above. The demand for Sporty's soccer balls is 1,250 units if −−−−−−−−. A) the price charged by Sporty is higher than the price charged by Go! B) the price charged by Go! is higher than the price charged by Sporty C) the price charged by Sporty is equal to the price charged by Go! D) the price charged by Sporty is higher than the cost of production of each ball
C
The equilibrium price and quantity of a good under perfect competition are determined: A) by the intersection of the market demand and total revenue curves. B) by the intersection of the total revenue and total cost curves. C) by the intersection of the market demand and market supply curves. D) by the intersection of the market supply and total revenue curves.
C
The general rule for welfare maximization suggests that in personal equilibrium: A) the ratio of total benefits to price should be identical across all goods. B) the ratio of total benefits to income should be identical across all goods. C) the ratio of marginal benefits to price should be identical across all goods. D) the ratio of marginal benefits to income should be identical across all goods.
C
The principal of optimization at the margin states that: A) an optimal alternative has the lowest indirect costs in comparison to other feasible alternatives. B) an optimal alternative has the highest net benefits in comparison to other feasible alternatives. C) moving toward the optimal alternative makes the decision maker better off, and moving away from it makes him worse off. D) moving toward the optimal alternative makes the decision maker worse off, and moving away from it, makes the decision maker better off.
C
The slope of a budget constraint represents: A) the price of the good measured along the horizontal axis. B) the price of the good measured along the vertical axis. C) the opportunity cost of one good in terms of another. D) the money income of the consumer.
C
Which of the following firms is likely to have the highest market power? A) A perfectly competitive firm B) A monopolistic competitor C) A monopoly D) An oligopoly with homogeneous products
C
Which of the following is NOT a direct determining factor of consumers' purchase decisions? A) Consumers' tastes and preferences B) Market price of the finished goods C) Cost of factor inputs D) Consumers' income
C
Which of the following is an example of specialization? A) The output of workers in a chocolate factory doubled when a new manager was appointed. B) The cost of production of a light bulb making factory decreased as its capacity increased. C) Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process. D) Import of better technology and machinery from developed countries greatly increased the number of laser printers that a company was manufacturing
C
Which of the following is true of an extensive-form game? A) The sum of the payoffs to the players in the game is always constant. B) It involves simultaneous decision making by the players. C) It involves sequential decision making by the players. D) The players in the game earn equal payoffs in equilibrium.
C
Which of the following statements is true? A) In the short run, a firm can vary all its inputs. B) In the long run, a firm cannot vary any of its inputs. C) Short-run cost curves lie above long-run cost curves. D) Short-run cost curves lie below long-run cost curves.
C
Which of the following statements is true? A) Optimizers with the highest opportunity cost of time push up the rental price of apartments with the highest commute time. B) Optimizers with the lowest opportunity cost of time push up the rental price of apartments with the lowest commute time. C) As the rental prices of downtown apartments rise, only workers with the highest opportunity cost of time will be willing to rent them. D) As the rental prices of downtown apartments rise, only workers with the lowest opportunity cost of time will be willing to rent them.
C
* A player has a dominant strategy when: A) her chosen strategy gives her a lower payoff than the other player. B) her chosen strategy matches the best response of other players in the game. C) she has many best responses to any strategy of the other player in the game. D) she has only one best response to every possible strategy of the other player.h
D
* Refer to the figure above. What is the revenue of the firm when it sells the profit-maximizing level of output? A) $40 B) $160 C) $180 D) $240
D
* Refer to the scenario above. Which of the following is true? A) Mike's best response is to hold out if Rita confesses. B) Rita's best response is to hold out if she expects Mike not to confess C) Rita's best response is not to confess irrespective of what Mike does. D) Mike's best response is to confess irrespective of what Rita does.
D
*The following figure shows the demand and supply curves for USB flash drives. D is the demand curve and S1 is the initial supply curve. Refer to the figure above. If the supply curve for flash drives shifts from S1 to S2, with no change in the demand curve, the new competitive equilibrium price is: A) $3. B) $4. C) $5. D) $7.
D
. −−−−−−−− is the market structure in which there are a few rival firms. A) Perfect competition B) Monopolistic competition C) Monopoly D) Oligopoly
D
As the −−−−−−−− increases, −−−−−−−−. A) quantity demanded of a good; its price increases B) quantity demanded of a good; its price decreases C) price of a good; its quantity demanded increases D) price of a good; its quantity demanded decreases
D
Which of the following is a feature of an oligopoly market? A) There is a large number of sellers in this market. B) There are no barriers to entry in this market. C) Each firm in this market earns zero economic profits. D) Each firm's action affects the decisions of its rival.
D
Which of the following is an example of differentiated goods? A) Books and cosmetics B) Fuel and water C) Potatoes grown by different farmers D) Tea and energy drinks
D
Which of the following statements is correct about the concept of willingness to pay? A) The willingness to pay is the lowest price that a buyer is willing to pay for an extra unit of a commodity. B) The willingness to pay for a commodity increases exponentially as the consumption of the commodity increases. C) The willingness to pay for a commodity increases linearly as the consumption of the commodity increases. D) If a consumer is consuming 10 units of a commodity and he is ready to pay $2 for the eleventh unit, his willingness to pay for the eleventh unit is $2.
D
